Congress’ Track Record in Controlling Healthcare Spending? Not Good

The failure in November on the part of the congressional “supercommittee” to come up with a deficit reduction plan marked just the latest in a long series of attempts by Congress to control health care spending.

The Medicare Catastrophic Coverage Act of 1988 (P.L. 100-360) was enacted in the last year of President Reagan’s administration. At the time, it was the largest expansion of the Medicare program. It had broad bipartisan support in Congress. The main aim of the law was to limit the out-of-pocket expenses for Medicare beneficiaries, especially Part B expenses. The law also added or expanded existing Medicare coverage in a number of areas – including a prescription drug benefit (prescription drug coverage was not part of the original Medicare program).

The legislation was even fiscally responsible – all the expanded benefits were to be paid for, largely by higher Medicare premiums and a Medicare income tax surcharge on wealthier Medicare beneficiaries. This proved to be the Act’s undoing, since wealthier seniors faced higher Medicare payments even if they didn’t receive extra benefits (because they already received them from a retiree health plan or a supplemental Medicare policy).

In the face of such strong opposition by voters, by the end of 1989, Congress had repealed it—including the prescription drug benefit–under the Medicare Catastrophic Coverage Repeal Act of 1989 (P.L. 101-234). Prescription drugs wouldn’t become a Medicare benefit until the Medicare Modernization Act of 2003 (MMA) (P.L. 108-173) was enacted. By this time, however, the drug benefit was much more expensive, it had fewer mechanisms to control the price of prescription drugs, and its financing was much more dubious (search this blog or the web for the terms “prescription drugs” and “donut hole”).

About ten years later, Congress attempted to control Medicare payments to physicians that were increasing well above the annual rate of inflation (see last month’s post “Can This Congress Act Again to Stop Deep Medicare Cuts to Physicians?”). Again, this was an example of one Congress attempt to reform the Medicare program, while succeeding Congresses, facing pressure from the myriad groups with a stake in Medicare (especially beneficiaries, physicians, and hospitals, in other words, both voters and big campaign donors) undoes that work.

The end result of Congress’ attempts at controlling physician expenditures under Medicare, and then undoing those statutes with later legislation, is that physicians currently face an almost 30 percent reduction in Medicare payments starting January 1, 2012, and a permanent “fix” would cost hundreds of billions of dollars either in new revenue or new cost-sharing on the part of beneficiaries.

The MMA also included another attempt by Congress to control Medicare spending. It included a provision with a somewhat arcane formula for determining when Congress had to act – if the Medicare Trustees in their annual report for two consecutive years noted that the amount of Medicare funding that came from general revenue (as opposed to premiums and co-payments and other means) exceeded 45 percent, the president was required to submit to Congress, and Congress to pass, legislation to address the issue of excess general revenue funding.

Starting in 2007, and in each year since, the Medicare trustees’ report has included such an “excess general revenue Medicare funding warning.” One year, President Bush presented legislation to address the issue, but Congress basically ignored it. For the last two years, Congress has passed further legislation to avoid acting on the warnings issued each year by the Medicare trustees.

Which brings us to the end of the supercommittee’s work, the impending automatic cuts that are “required” to be imposed by law, and the looming large cut in Medicare payments to physicians. With Congress seemingly unable to legislate any further beyond than the next election (and some would argue perhaps not beyond the next news cycle), it should come to no one’s surprise that the actions that Congress takes in the next month and the next year regarding Medicare spending will be short-term only.